The company released its 2024 mid-year report: 1H24 achieved revenue of 0.727 billion yuan, +121% year over year; achieved gross profit of 0.099 billion yuan, +672.8% year on year, gross profit margin 13.6%, +9.68 pcts year on year; net loss to mother of 0.269 billion yuan, net loss decreased by 65.1% year on year, net interest rate -37%, year on year +197.36 pcts year on year. Among them, 2Q24 achieved revenue of 0.366 billion yuan, +98.8%/+1.4%; gross profit of 0.054 billion yuan, +190.3%/21.6%, gross profit margin of 14.8%, and 4.65/+2.45 pcts; net loss to mother of 0.135 billion yuan, -68.3%/+2.7% month-on-month, net profit margin -37%, month-on-month +194.75/0.46pcts.

Shipments in the first half of the year were close to last year's full year, and the scale effect offsets the impact of the annual decline. By product, the revenue of 1H24 lidar products was 0.687 billion yuan, +192.3% year over year, and sales volume was about 0.2434 million units, +415.7% year over year. Among them, automotive ADAS lidar revenue was 0.609 billion yuan, +314.6% year over year, and sales volume was 0.2345 million units, +487.7% year over year. According to Geshe Auto data, domestic market share of over 40% ranked first. Although ASP fell from 3,700 yuan to 2,600 yuan in the same period last year due to annual price drops and an increase in the share of mass production shipments, ADAS gross margin increased to 11.2% from -35.5% in the same period last year to 11.2%, and overall gross margin increased to 13.6% from 3.9% in the same period last year. The robotics business was affected by the product portfolio and ASP declined significantly. Revenue growth stalled in the first half of the year. According to significant breakthroughs in management's current orders, growth momentum is expected to resume in the second half of the year. Looking ahead to the future market, we believe that with mass production of new designated models and the arrival of the traditional peak season for downstream vehicles in the second half of the year, mass production of self-developed SoCs will replace external FPGAs, and the revenue scale and gross profit level are expected to increase further.

Operating leverage has been expanded, and expense ratios have improved markedly. In terms of expenses, the company's sales/management/ R&D expenses for the first half of the year were 0.057/0.082/0.313 billion yuan, respectively, and the cost rates were 7.8%/11.3%/43.1%, respectively, -4.4/-40.5/-31.8 pcts. The company achieved an operating loss of 0.322 billion yuan in the first half of the year. Benefiting from improved expense ratios, the operating profit margin narrowed sharply from -140.3% in the same period last year to -44.3%.

The 1,000-yuan MX is expected to be mass-produced in 1Q25, and overseas business is progressing smoothly to expand medium- to long-term growth space. The company's next-generation products MX and M3 further reduce costs and improve efficiency, and are accurately positioned to expand market segments. Among them, the MX price has been lowered to the level of 1,000 yuan on the basis of maintaining the same level of performance as the current model. It is expected that 1Q25 will be mass-produced and launched at the new MARS plant in Shenzhen-Shantou, and is expected to achieve a rapid increase in penetration rate in the 0.15-0.2 million yuan price range; the M3 supports 300m @10NIST ultra-long distance measurement, and has greatly improved performance at the current cost level, targeting complex scenarios in the middle and high speed overseas. In terms of overseas business, the company once again added one of the world's top ten overseas OEM customers in July after being designated as the top OEM customer in the world, which is expected to provide new revenue growth momentum in '26.

Profit forecasting and investment ratings. We expect the company's 2024-26E revenue to be 2.145/3.7/5.8 billion yuan, and EPS of -1.05/-0.52/0.18 yuan, respectively. Referring to comparable company estimates, we gave 3 times PS in 2025, corresponding target price of HK$26.78 (previous target price: HK$46.19, corresponding 4.2 times PS in 2025, a reduction of 42%; HK$1 = Rmb0.9193). Maintain an “better than the market” rating.

Risk warning. Business progress falls short of expectations, lidar penetration rate growth falls short of expectations, R&D progress falls short of expectations, etc.